Wednesday, 12 April 2017

How low can the UK jobless rate safely go?

According to the latest official data (mostly covering the three months to February 2017) just released by the Office for National Statistics, the UK labour market continues to enjoy a robust
sustainable expansion. There were 39,000 more people in work (mostly full-time) in the
latest quarter plus a record number of job vacancies (767,000), 45,000 fewer unemployed and 10,000
fewer economically inactive alongside an easing in pay pressure. A joint record
employment rate of 74.6%, an unemployment rate at a 42-year low of 4.7% and
almost zero (0.1%) growth in real average weekly earnings illustrates a
remarkable structural change in the operation of the UK labour market compared
with earlier decades. This particular combination of jobs and pay suggests that
the unemployment rate could fall much further, perhaps below 4%, without triggering
troublesome pay inflation. While the effect of Brexit uncertainty on the demand
side of the economy might yet result in a temporary rise in unemployment later
this year, full employment is thus now a more realistic prospect for the UK than at
any time since the early 1970s.’

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